Do You Want a "Patent Troll" Under Your Bridge?

A patent "troll", also known as a patent assertion entity (PAE)
is a person or entity that acquires rights to patents for the primary
purpose of suing infringers to collect licensing fees. Patent trolls do
not use the patents to manufacture new products or provide services. Several
of the largest patent trolls include Intellectual Ventures, RPX Corporation
and General Patent Corporation.

In response to pressure from high profile technology companies, the US
government has stepped up its rhetoric criticizing the practices of patent
trolls. In 2011, the Federal Trade Commission (FTC) put patent trolls
on notice that it planned to start investigating trolls. In June 2013,
President Obama said that patent trolls "don't actually produce
anything themselves, they're just trying to essentially leverage and
hijack somebody else's idea and see if they can extort some money
out of them."

As evidence of the negative impact of the rise of patent trolls, 2900 patent
infringement suits were filed in 2012 nationwide, nearly 6 times more
than were filed in 2006. In 2012, approximately 61% of patent infringement
suits were instigated by patent trolls. The typical cost of providing
a defense against such a suit typically costs between $1 and $2.5 million,
even if the defendant is successful. For this reason, most defendants
settle for a few hundred thousand dollars, even for suits they believe
are frivolous.

On the positive side, by providing a secondary market for patents, patent
trolls provide an important source of liquidity for firms wanting to sell
their patents. For example, many start-ups have a portfolio of valuable
patents, but need to raise capital to pay bills, build infrastructure,
and continue to grow. Selling their patents to patent trolls can be a
very good way for these firms to turn non-revenue producing patents to
better use within their company. Additionally, by providing a market for
inventors to sell their patents, patent trolls may actually encourage
innovation by providing an incentive to invent and obtain patents.

The information on this website is for general information purposes only.
Nothing on this site should be taken as legal advice for any individual
case or situation. This information is not intended to create, and receipt
or viewing does not constitute, an attorney-client relationship. Dossey & Jones PLLC is not an accounting or CPA firm.

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